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tv   Nightly Business Report  PBS  August 30, 2011 6:30pm-7:00pm EDT

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>> housing, which was clearly a drain on the economy in the first couple of years of this recovery is now about neutral. >> susie: housing prices rebound in the spring. while the news is good, the market's home improvement may be only temporary. >> tom: and consumer confidence plunges amid wall street turmoil, drama over u.s. debt and fears that an economic recovery was stalling. it's "nightly business report" for tuesday, august 30. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
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this program is made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt >> susie: good evening everyone. stocks flip-flopped today as investors tried to make sense out of a new batch of reports that gave mixed a picture about the u.s. economy. tom, everyone's worried about recession so each new data point is important. >> tom: yeah, and can really drive the market. susie, here's what we learned today: a closely watched consumer confidence index fell to its lowest level in two years. the conference board survey said
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consumers are pessimistic about the outlook for jobs and wages. as for housing, home prices rose 3.6% in the case-shiller 20-city index during the second quarter- - the first quarterly increase in a year. but the index was nearly 6% below its year-ago level, and more than 31% below its peak five years ago. >> susie: then, this afternoon, the federal reserve released minutes from its august 9 meeting, showing that some policymakers pushed for more aggressive action to boost the economy. those fed minutes also revealed that the central bank's policymakers are deeply divided on what to do next to fix the economy. darren gersh has more on that and the day's other economic news. >> reporter: if you're confused about where the economy is headed, and not sure what should be done to fix it, you are in good company. economist adolfo laurenti says the minutes of the federal reserve's august 9 meeting show chairman ben bernanke and his colleagues were divided over how aggressive to be in addressing an uncertain outlook.
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>> there is a variety of indicators pointing in different directions. there is genuine uncertainty, and i think the federal reserve is reflecting what we all do not know. >> reporter: in the minutes, some fed governors favored an aggressive approach, including more bond buying to bring down interest rates and boost markets. but others argued monetary policy could do little to heal economic wounds that will require time to mend. perhaps a long time. the minutes show the fed staff thinks the recession has lowered the long-term growth rate of the economy. >> unfortunately we suffered a lot of damage, a lot of dislocations, a lot of people out of job. many of them may be out of job for a long time. and this will reflect in somewhat disappointing growth going ahead. >> reporter: one example of that? housing. it's been at least four years since home prices topped out, and the market hasn't yet hit a convincing bottom.
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>> housing, which was clearly a drain on the economy in the first couple of years of this recovery, is now about neutral. the hope is that in another year, we can say that it's a net positive. but we don't know yet. >> reporter: nationwide home prices are now about where they were eight years ago, while prices in much of california, dallas, minneapolis and washington, d.c., are up from their lows of 2009, there is widespread weakness across the sunbelt. las vegas, phoenix, tampa and miami have all set new lows in recent months. >> they all show, if anything, scant gains above their lows, and it's really not clear whether these lows are going to hold or late this year they'll be back down making new lows again. >> reporter: if the federal reserve does decide the economy needs more help, there are many options. at their august meeting, fed leaders discussed everything from cutting the interest rates on excess bank reserves to buying bonds with a longer maturity in an effort to bring down long-term interest rates.
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darren gersh, "nightly business report," washington. >> susie: joining us now, kenneth rogoff, professor of economics at harvard university. hi, ken. nice to have you on the program tonight. >> hi, susie. thanks for having me. >> susie: so let's pick up with darren just left off and talk about the fed. i think it's kind of interesting that here we've got this group of policy-makers looking at the same day dark coming up with different on collusions on what it means and not being able to agree on what to do next. what's your take on what came out of the fed today? >> there's clearly a lot of disagreement at the fed, and ben bernanke has probably purred them as far as he can right now. i think he would like to be more proactive. he would like to cut off the risk of a deeper downturn, something worse happening, but those think we can't do that much. interest rates are almost at zero, and quantitative easing didn't seem to do that much, and we're nervous about inflation. there's a lot of disagreement within the board.
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so i don't think you can see anything quick happening, nothing big out of the fed. also with all the outside anger about the last round of bond buying. >> susie: so you're right about quantitative easing inside and outside the fed. a lot of people are calling for another round of pumping money into the economy. are you saying that's just not going to work at this stage? >> new york i'm not saying that at all. i think it would be a good idea. i think the balance of risk here is much more towards a very prolonged japan-type downturn which lasts a long time, and having inflation a bit elevated is just not the problem right now. but the fact is a lot of these people who are in the federal reserve were sort of schooled in the 1970s. they think big mistakes were made. they allowed inflation to go on too long, and they're focusing on that. i think that's a mistake. i think this is a different kind of thing. it's more like a mild version of the great depression, and we
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shouldn't treat it like the '70s. >> susie: well, let's talk a little bit about inflation, because you do believe that the economy right now could use a healthy dose of inflation. tell us what your thinking is on that? how would that work? how would that help? >> well, let me be clear, what the problem is right now is we're not in a typical recession. we're in a post-financial crisis recession, which seemed to last much longer, more like five or six years instead of just a year. we're still in the recession. i think every american understands that. output per person is not near where it started at the peak of the crisis, and the big difference after financial crises is there's a lot of debt, private debt and increasingly public debt, and i think that has to be the focus. i'd like the tackle it directly through mortgage restructurings, in some cases forgiveness. that's very controversial. and i think we have to look for other avenues, certainly a little bit of inflation, say 4%,
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5% for a few years would be the least of our problems, and it might lower the burden of these debts as people's wages go up. >> >> susie: but if you have that inflation, is that going to jumpstart the economy? is that going to create jobs? >> it will help bring us out of this a little faster. nothing is going to be really quick here. when you're in a deep financial crisis like this, the thing to do is keep your eye on the fundamentals. america's a great economy. we've done things right for a long time. continue to do these things and really just at the margin it can help by having a way of deleverring, reducing the debts in the economy directly if possible and if not through a little bit of inflation. >> susie: real quickly, we have 30 seconds, president obama is expected to make some big speech about his economic plan that will create something like a million jobs. what do you think he's going to say and will it do the trick?
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>> well, a million is a nice, round number. i hope he's talking about private sector jobs. i think that's really the problem in the economy is building up organically. there's certainly room to reduce regulation. there are ideas out there. i wish him luck. >> susie: all right. we'll leave it there. we'll check back with you afterwards. thanks so much, ken, for coming along tonight on the program. >> thank you. >> susie: we've been speaking with kenneth rogoff, professor of economics at harvard university. >> tom: stocks moved higher after the federal reserve minutes were released, showing a divided central bank debated the merits of a third round of asset purchases. at the close, the dow added nearly 21 points, the nasdaq rose 14 and the s&p 500 up about three points. volume picked up from yesterday. just over one billion on the big board and under two billion on the nasdaq. >> susie: two of the world's biggest oil company's are teaming up to drill in the acrtic circle.
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exxon mobil and rosneft, russia's big state-owned oil company, will work together to develop offshore oil fields in the russian arctic. it's one of the globe's last regions with immense and untapped hydrocarbon deposits. as part of the $3 billion joint venture, rosneft will get access to some exxon projects in the gulf of mexico. rosneft needed a partner for the arctic because it does not have its own deep sea drilling technology. it tried to strike a similar deal with b.p. earlier this year, but that fell through. >> tom: exxon mobil is a direct descendant of john d. rockefeller's standard oil company. rockefeller began as an entrepreneur who built an empire. many immigrants are trying to follow in those footsteps. many of the biggest u.s. brands, including apple, google, at&t , ebay, general electric, i.b.m. and mcdonald's owe their origin to a founder who was an immigrant or the child of an immigrant. one businessman in chicago is trying to make his way to that list. diane eastabrook has his story. >> this is what i imagine... >> reporter: inside this fourth floor condominium, a fledgling
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business empire is blossoming. >> the idea is, we're going to have a feature that sells other products. >> reporter: 27-year-old indian immigrant aksh gupta and his business partners are tweaking their year-and-a-half-old internet company timetoplaytennis.com. >> the site sells unused court time at local tennis clubs and lessons to consumers. >> reporter: gupta wants to expand into tennis equipment sales and other services. >> for consumers, it's a great way to buy, compare and shop. >> reporter: gupta echos the sentiment of many immigrants when he says he is living the american dream. >> i vividly remember my auntie telling me the night we came. the first thing she said was, "this is your chance to start your life new. this is the land of opportunity." >> reporter: gupta grew up in india, where his father owned an electronics company. in 2003, at the age of 19, he came to america with his parents and younger brother. the family settled in st. louis, where gupta's uncle owns a medical supply company. after graduating from college in
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chicago, gupta began working for his uncle. but, he knew he wanted to be his own boss. >> i knew during college i would never be working for somebody for the rest of my life. i would be working for myself. i just never knew it would come so soon. >> reporter: gupta thinks being relatively new to this country helps him be bolder and less fearful of failure. >> you don't know many people who are going to say "oh, you failed." you have new friends. they want to support you. you can be a little more daring. i think that's what it is. i'm never thinking about failure. >> reporter: that attitude has helped gupta take on many challenges. while expanding time to play tennis, he's also launching a companion site for other activities called playoccassion.com. and he's attending graduate school. gupta says, in many ways, being an immigrant has helped him juggle so much at once. >> its makes you drive harder. it makes you work harder because you want to get your life in order again. >> reporter: diane eastabrook, "nightly business report,"
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chicago. >> tom: we talk with several other young business owners monday in our labor day special edition, "young entrepreneurs." we ask experts what it takes for up-and-coming businesses succeed. and, since few ideas can succeed without money, we'll tell you how to go about getting it. our special, "young entrepreneurs," airs this monday on "nightly business report." >> susie: the devastation from hurricane irene continues, two days after the massive storm coursed through the northeast. more than 2.5 million people from north carolina to maine are still without electricity today. the water damage from the rain left behind by the storm is still growing, as in new jersey, where rivers continue to rise. in vermont, national guard helicopters are being used to take food and water to some communities. about 260 roads in vermont are closed by storm damage, along with about 30 highway bridges.
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>> susie: some trading excitement, and confusion, just after lunchtime here as the new york stock exchange suffered what it called a "momentary" glitch in trading and "processing" around 1:00 p.m. the glitch impacted 47 stocks, including g.e., coca-cola and m.g.m. tom, no word yet on what caused the problem, but the big board did say systems are back to normal. >> tom: got back to normal pretty quickly by middle afternoon, as a matter of fact, susie. a flip-flop market here, no doubt acted it. confusing prices a little bit with tonight's "market focus." let's get to it. the major indices were able to build slightly on yesterday's strong gains, marking a three- session rally. here's the day's trade for the dow industrials. here it is, you can see despite the fractional gain at
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the end of the session, it was another day of a 200-point trading range. the market finally caught a sustained bid around 2:00 p.m. eastern time, when the fed's minutes were released, pumping up hope for more stimulus. airplane maker boeing led the dow gainers, up more than 2%. this is the past 30 sessions. and while the stock remains down from earlier this summer, shares are up 15% from its low this month. today, boeing announced it has almost 500 orders for an updated 737 plane, its best selling product. the newest version will be delivered in 2017. financial stocks saw the biggest losses. this financial exchange-traded fund fell a fraction. this sector has been leading the market volatility this month. the three biggest losers inside the dow were its financial stocks. bank of america led the losers, down more than 3%. j.p. morgan and insurance firm travelers each were down more the 1%.
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homebuilder stocks continued their recovery on the heels of the home price data from s&p case shiller we mentioned earlier. showing quarter-over-quarter gains was enough for homebuilding stocks. the home-builder exchange traded fund saw heavier-than-usual volume on this move today of more than 1%. we're looking at the last 180 sessions. k.b. homes popped almost 8%. pulte jumped more than 7%. it was aided by an analyst upgrade in addition to the housing data. and d.r. horton gained a more modest 2.7%. meantime, real estate services firm core-logic jumped almost 30%, still not enough to make up for the damage earlier this month. big volume. but the buying today came as the company announced a committee to explore strategic options. what does that mean? those options include a spin- off, merger or possible sale. the biggest gainer among s&p 500
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stocks was online jobs site monster worldwide. how about this move? shares shot up 21.5%, a big gain and on big volume. the trading pace was almost four times average. tomorrow we get month private payroll data from a.d.p. and on friday the government reports august employment figures. but today it was disclosed three monster executives have purchases a combined 87,000 shares recently. leading to the rally. a couple of retailers moving off of their earnings and outlooks. dollar general gained almost 6% as it raised its profit forecast range. and book retailer barnes and noble jumped almost 15% despite losing money in the latest quarter. still, it predicts sales of its electronic book reader "the nook" will more than double this year. and that's tonight's market focus.
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>> tom: the u.s. government may have had its credit rating dinged, but investors continue piling into bonds, driving down their yields. meantime, almost 40% of the companies in the s&p 500 offer higher pay rates than uncle sam. that brings us to tonight's "word on the street," "dividends." david peltier is a portfolio manager at thestreet.com. david, how much protection to dividends provide during the kind of volatility we've seen over the past month or so? >> well, a fair amount, tom. in the short term dividends can only help so much. stocks are going to go down 10%,
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some of these stocks will also go down, albeit by a lower amount, but over the long run, that's when dividends really pay off. over the last several decades, dividends account for almost half of the gains in the s&p 500. >> tom: it's important the long run. you're talking ten years, 15 years, 20 years to hold on to see these kind of returns, right? >> in fact, with the s&p, that's over the last seven decades. some of these stocks can be held for several decades. >> tom: let's get to tonight's dividend ideas beginning with eat, e-a-t. it's better known as chili's. it runs the chili's chain of restaurants. $23 per share, yielding just under 3%. why do you like it? >> the key with dividends is i like dividends that are growing. brinkers just recently raised the dividend last week. the stock is yielding 2.8%. this is dividend that can be covered with solid earnings growth. >> tom: when is a dividend safe and when is it not safe? how do you judge a company's ability to continue to pay if not grow its dividend? >> basically i look for two
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times earnings coverage. brinkers earns almost three times as much as the dividend. i also like that the company is growing its earnings in double-digitfs double-digits for the second straight year. >> tom: very positive. you also like altria, mo the ticker symbol on this one, also known as philip morris. where does the dividend go from here? >> the company just recently raised the dividend just earlier this week some the yields, as you mentioned, over 6%. companies t company has now raised its dividend 45 times in the past 42 years. this is a serial raiser and really i think this is a stock that will give you consistent double-digit growth with a 6% baseline, it's not hard for the stock to move you up into the double-digits. >> you have to be comfortable owning a cigarette maker knowing where these profits come from. one sector that got hurt by these dividends, the banking stocks over the past several years, and a sector that doesn't pay dividends is technology. microsoft is a final choice in technology. this is battle between a growth
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and value stock for years yielding 2.5%. why this one? >> what i like about microsoft is they haven't raised the dividend yet. the stock already yields 2.5%, but i expect that they'll raise the dividend some time in september. in the meantime, like you said, it's a battle between value and growth, but i would like the buy microsoft. it's trading at just nine time earnings. i think it's very inexpensive for a company that generates tons of free cash flow. >> tom: making the value argument there. can you own any of these, do you? >> i cannot and do not. >> tom: david's article, you can find it on thestreet.com. word on the street with david peltier. >> susie: here's what we're watching for tomorrow: we'll see if the private sector is adding jobs, as payroll processing firm a.d.p. reports august employment numbers. also tomorrow, the weekly reports on crude oil and gasoline inventories. and, hilary kramer is our "street critique" guest. you can email your questions to streetcritique@nbr.com.
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federal officials say a california gas company's "litany of failures" led to last year's pipeline explosion near san francisco that killed eight people. in a scathing report, national transportation safety board officials blame the explosion on poor pipeline welds, inadequate inspection by regulatory agencies and a lack of an emergency response plan. there was no immediate response to the report from pipeline owner pacific gas and electric, but the company has said it's taken "multiple steps" to improve the safety of its natural gas operations. >> tom: lehman brothers took a big step towards officially wrapping up its bankruptcy today. a federal judge gave lehman's creditors the green light to vote on the failed bank's $65 billion payback proposal. lehman filed for bankruptcy nearly three years ago. it was the biggest bankruptcy in u.s. history. since then, the estate has sold off portions of the firm's business and assets, trying to recover money for institutions around the world.
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>> susie: as we mentioned earlier, today's consumer confidence numbers show americans are as pessimistic now about the u.s. economy as they were in the middle of the great recession. but instead of feeling down, tonight's commentator thinks we should feel thankful. here's alfred edmond j.r., senior vice president and editor at large at "black enterprise."
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>> we're still struggling to recover from the worst recession of most of our lifetimes. the stock market is volatile, you've cut your operating budget to the bone, and it's been years since you've been able to give raises to even your most deserving employees, much less rehire those you've had to lay off. in this environment, it's hard to see much to be thankful for. however, times like this call for just that--a spirit of thankfulness and appreciation. go out of your way to express gratitude to others with a hand- written note, a heartfelt phone call, even an email message. or, better yet, face to face. not to make another sale or gain a business advantage, but just because it's good and right to do. thank the employees who've stuck with you through these difficult times. show gratitude to the customers who've stayed loyal to you, or who looked out for you even if they couldn't continue to patronize your business. express honest and direct appreciation to friends and family who share your adversity, and remain patient and encouraging in the face of it. nothing produces positive energy, fresh vision and new opportunities like the spirit of
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gratitude freely shared. and there are few things more valuable than knowing you are appreciated when times are tough. i'm alfred edmond jr. >> tom: finally, american airlines is looking to put more luxury back in flying first class. think complimentary pajamas, slippers, along with some high- end toiletries. starting thursday, that's what first class passengers on certain flights between the u.s. and heathrow can expect. passengers in the business class cabin will also get some high- end goodies, like duvets and pillows. susie, these amenities come with a price. a first class ticket to heathrow may put you back at least $15,000. maybe $15,000 for pajamas, but you get an airline seat for free. >> susie: i love the amenities, but not the price. >> tom: how about it? >> susie: i'll bring my own pillow. that's "nightly business report" for tuesday august 30th. i'm susie gharib. have great evening, everyone. tom, i hope you have a nice night.
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>> tom: you too, susie. thanks for joining us. have a great night, an we'll see you right back here tomorrow night. "nightly business report" is made possible by: this program was made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org >> be more. pbs.he
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